S and P mulls Glencore rating rise after Xstrata merger

Ratings agency Standard & Poor's said on Wednesday it would likely raise its rating on commodities giant Glencore if its proposed merger with mining company Xstrata goes ahead.Glencore's BBB long-term status is under review following the $61.9 billion deal announced on Tuesday, S&P said in a statement."If and when Xstrata shareholders approve the merger and antitrust authorities give their green light, we expect to assign a 'BBB+' rating to the enlarged entity," it said.

The one catalyst many Glencore bears have been eagerly waiting for, is the downgrade of the troubled independent energy trader to junk status, a catalyst which as previously explained, will likely spring various, heretofore unknown margin calls and collateral "waterfalls" a la AIG.

Mining giant Glencore has responded to concerns over its levels of debt and falling commodities prices by suspending its final dividend in 2015 and launching a series of measures uncluding a capital raising to slash its borrowing, reports The Telegraph.

One of the corporate catalysts which unleashed the market "wobble" in August, in addition to the confluence of macro and geopolitical events, was the dramatic repricing of risk for all the commodity traders in general and for Glencore in particular as the market caught up with what we had cautioned since early 2014: Glencore is the closest (and most readily tradable) proxy to China's commodity and credit crunch, due to its extensive and direct exposure to copper prices.

According to the Wall Street Journal, merger talks between Barrick Gold Corporation (ABX) and Newmont Mining Corp (NEM) recently took place, but broke down over minor disagreements with hopes of a revival of talks in the future. This is the third time that Barrick Gold has tried to acquire Newmont Mining, failing before in 2008 and 2010.